Chapter 14: The Longcut of the Love of Money

Chapter 14: The Longcut of the Love of Money

            You’ve probably heard it said: “Money is the root of all evil,” which isn’t true. What can be evil is the misuse or abuse of money. The actual Biblical quote states truth: “For the love of money is the root of all evil.” It’s not money. Money is just money, neither good nor bad. It’s the love of money that causes problems. It’s how you feel about money and how you use it determines whether money becomes a blessing or cursing. George Bernard Shaw changed the Bible’s version to: “The lack of money is the root of all evil.” I’m sure he was joking. What money becomes to you depends on your integrity. When a moral person lacks money, he or she works and prays harder and is blessed to find ways to obtain the resources needed. When an immoral person lacks money, he or she will do anything to get money. How you use your money makes your integrity more obvious. How you use money reveals your character. Money is a necessary means in our world to exchange goods and services and can be the means of doing great good. “For where your treasure is, there will your heart be also: (Matthew 6:21). There are many ways to misuse money. We will discuss two.

Money Longcut #1: Playing the lottery

            The fact is not that money is good or bad but rather how individuals use or abuse money. This truth can be proved by what happens to people who become suddenly rich by winning a lottery. It’s revealing to observe that money doesn’t change the winners. Their bad habits, their weakness, their inability to resist, persist, delay gratification, and to say no, in fact all thirteen truths we’ve discussed, stay with them after they’ve won. At www.moneycentral.msn.com is an article about lottery winners who abused their millions. In these brief sketches, you’ll see that winning truck loads of cash amplifies a person’s values, be they good or bad.

            Evelyn Adams wond the lottery in 1985 and again in 1986. She said, “Winning the lottery isn’t always what it’s cracked up to be.” Today the $5.4 million is gone and she lives in a trailer. “I won the American dream but I lost it, too. It was a very hard fall. It’s called rock bottom,” says Adams. “Everybody wanted my money. Everybody had their hand out. I never learned one simple word in the English language—‘No.” I wish I had the chance to do it all over again. I’d be much smarter about it now.” What was it she couldn’t say “No” to? Gambling. She lost her money at Atlantic City in slot machines. It can’t be much of a surprise that many people who buy lottery tickets have a gambler’s mentality. It’s too bad she didn’t take Nancy Reagan’s advice to “Just say no,” is her case, to gambling.

            William Post won a Pennsylvania lottery of $16 million in 1988. He said, "I wish it never happened. It was totally a nightmare." One year later he was a million dollars in debt. Today, after declaring bankruptcy, he lives on Social Security and food stamps. Are you interested in what he couldn’t say “No” to? A girlfriend and his siblings who were giving him bad advice. He didn’t take counsel from those who had successfully traveled the road before him. He said he was careless, foolish, and when things became tough, he fired a shot over a bill collector’s head and spent a year in jail after.

            Suzanne Mullins’ poor money skills cost lost her the $4.2 million she won. What couldn’t she say no to? Debt and an uninsured son-in-law’s medical bills. Ken Proxmire, a machinist, won one million. He took his money to California and went into business with his brothers. Five years later, he filed for bankruptcy. His son said, "He was just a poor boy who got lucky and wanted to take care of everybody. Today he is back working as a machinist. It seems he didn’t have good sense about how to help others. Saying no to others is a skill Ken didn’t have before or after he won. In 1975, Charles Riddle one a million dollars and lost it on a divorce and was indicted for selling cocaine. In 1989, Willie Hurt lost his three million the same way. Within two years he was charged with murder and had lost the money on a divorce and crack cocaine. “Just say no to drugs” was a lesson Charles and Willie didn’t learn.

            Compare these stories, and there are many more, with the story of Steve and Carolyn West and Carolyn’s parents, Bob and Frances Chaney who shared a $340 million lottery win. Just as with the losers above, the Wests and the Chaneys had the same behaviors before and winning. Steve had previously learned some tough financial lessons, including declaring bankruptcy after he lost his job. He was forced to be frugal; a habit that didn’t change after he won. He still clips coupons. When they won, they wisely employed a financial counselor who helped them manage the money. The counselor budgeted $300,000 a month. "We said, 'We don't need that much,'" Steve remembered. The bottom-line for these lucky winners is they enjoy their money and have used it for good because that’s who they were and are. Carolyn still works thirty hours a week as a bookkeeper, earning about $1,000 per month. They made another wise decision not to give any money to individuals but established a foundation to help "family and Christian organizations and law enforcement." Steve described their change in fortune as being lucky but also said, “I can't believe how blessed we've been…. When you have the money to buy whatever you want, you realize it's not the stuff you can buy that's really important; it's still being around family” (See www.people.com/people/archive/article/0,,20061688,00.html.)

            Your moral values and habits determine what you do with whatever money you have. Your values determine your feelings about the benefits or evils of the lottery. Those who purchase lottery tickets are usually poorer and less educated than people who don’t play lotteries. Those who do the math see clearly that even though someone does win, the odds against winning are staggering. According to webmath.com, where you can calculate your odds, “you have better chances of getting into a car accident, plane accident, or struck by lightning, than to win the lottery. Sadly, one-third of people in the United States think winning the lottery is the only way to become financially secure in life. In a New York lottery, the odds of winning were 1 in 22.5 million. (See: http://what-are-the-chances.blogspot.com/2007/12/lottery-tax-on-stupidity.html.) Playing the lottery has been dubbed a tax on the poor and the stupid. Playing the lottery can become addictive. Playing the lottery is a longcut.

Money Longcut #2: Debt     

              As we’ve seen, those who win big money often lose it because of their inability to manage their lives, let alone manage millions of dollars. In contrast, those who earn their money are much less likely to squander it. Along the road to earning money, most people develop skills and abilities to use the money they have worked for to prepare for the future in some combination of saving, investing, spending, and giving away. (Hopefully everyone has the opportunity to give money to the less fortunate and good causes. It’s a really good way to feel good because you’ve done good.) Unfortunately many Americans live paycheck to paycheck and let expenses rise to meet or exceed their level of income, which translates into the fact that Americans aren’t good at saving. So when unexpected expenses come along, as they always to, borrowing seems to be the solution.

            Debt, as taught by some influential people, including college professors, is a way to achieve financial independence. Numerous best-selling books have touted debt as a tool to create wealth. The truth about debt is when you borrow, you use other people’s money (OPM) and become their slave. You become their way to earn money. Using debt as a tool can be as risky as playing the lottery. However, there are some few who do get rich using other people’s money, just like there are some few who win the lottery. And what do those lucky few do who get rich using debt? They write books about their methods of how using other people’s money worked for them, adding royalties from book sales to their earnings. The truth is: the debt-as-a-tool theory is a lie because debt takes away financial agency. Debt is slavery. Debt can be a very long longcut. The more debt you carry the less free you are, and debt is not just a financial problem. Debt causes stress on individuals, marriages, and families. A USA Today article titled: “Many marriages today are 'til debt do us part,” states the problem.  Money buys many things, but it can’t buy a happy marriage. Not surprisingly, money turns out to be the leading cause of divorce. According to a survey conducted by Citibank, fifty-seven percent of divorced couples in the United States cited financial problems as the primary reason for their divorce. We are a nation of debtors.

·       The average credit card debt per household with credit card debt: $15,788 (Source: www.creditcards.com)

·       Total credit cards in circulation in U.S: 576.4 million, as of yearend 2009 (Source: Nilson Report, February 2010)

• Average number of credit cards held by cardholders: 3.5, as of yearend 2008 (Source: "The Survey of Consumer Payment Choice," Federal Reserve Bank of Boston, January 2010)
• Average APR on new credit card offer: 14.10 percent (Source: creditcards.com Weekly Rate Report, May 2010.)
• Average APR on credit card with a balance on it: 14.67 percent, as of February, 2010 (Source: Federal Reserve's G.19 report on consumer credit, May 2010)
• U.S. credit card default rate: 13.01 percent. (Source: Fitch Ratings, April 2010)

         Using other people’s money (OPM) is NOT a quick trip to prosperity.  A Christian minister, Dave Ramsey, who has made it his “mission” to help others be better money managers, presents seminars and has a talk radio show. He often tells listeners how he learned the evils of the philosophy that debt is a tool the hard way, through experience. He said, “God had some lessons to teach me. Only after losing everything I owned and finding myself bankrupt did I think that risk should be factored in, even mathematically. It took my waking up in "intensive care" to realize how dumb and dangerous this myth is. Life hit me hard enough to get my attention and teach me. “According to Proverbs 22:7, "The rich rule over the poor, and the borrower is slave of the lender" (NRSV). I was confronted with this scripture and had to make a conscious decision of who was right – my broke finance professor, who taught that debt is a tool, or God, who showed the obvious disdain for debt” (www.daveramsey.com).

            It’s been said:  “Make $4, spend $5, live in agony.  Make $4, spend $3, live in joy.”  Wouldn’t it be nice to be out of debt? Is it possible to be debt-free? How long would it take?   Consider this accelerated debt-reduction plan. First, make a list of all debts from smallest to largest. List to whom the money is owed, the minimum payment due each month, the interest rate, and the total amount due.  Just for example, let’s say the smallest debt is $400 to Macy’s and the minimum monthly payment is $25. The first step to becoming debt-free is to double that payment to $50.  Then as soon as the Macy’s bill is paid in full, you have $50 a month to add to the next debt on your list. For example, if you owe $600 to your Visa card and the minimum due is $35, you now have that $50 additional to add to the $35 or $85.  As soon as that debt is paid in full, you have $85 to put towards the next debt. The average American family can be debt-free using this method, INCLUDING MORTGAGE, in six to nine years! Then when the debts are all paid, what do you do with all that money? Pay yourself—save, invest, and gather assets for the lean years of retirement, recession, or when your family needs are the greatest. You can also begin to give more away to your church or favorite charity. As you shift from making payments to someone else and make them to yourself, you arrive at the enviable place where instead of paying interest, you earn interest.      

            To illustrate the enslaving nature of debt, how long does it take to pay off a $2,400 credit card debt if you pay the minimum monthly payment of $48? As impossible as it seems, 43.6 years!  How long does it take to pay off that debt if you take advantage of the offer to skip a payment every December? Almost twice as long, 85.2 years. Debt is slavery.  J. Rueben Clark in Specter of Debt wrote: “Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; it takes no pleasure; it is never laid off work nor discharged from employment.... Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, nor orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.” On the other side of the coin, a family invested $250 in 1973 and forgot about it.  Recently they discovered that $250 account had grown to $12,000. 

            Lending companies, whose profits are based on the interest borrowers pay to them, offer two lures—a second mortgage and debt consolidation loan. Both are extremely risky. They are wolves in sheep’s clothing. Debt by any other name is still debt. Statistics show that 80% of persons who get a debt consolidation loan within two years have accumulated as much new debt as when they went for the debt consolidation. Their behavior hasn’t changed; they have not learned to differentiate between needs and wants; they’ve not learned financial discipline. Also, bankruptcy is not the answer. Bankruptcy has been called a ten-year mistake.”

         Experts suggest three priorities for wise financial planning.  First, purchase a modest home and pay off the mortgage as soon as possible. Second, save 10% of all income and more during prosperous times; and third, incur no debt. If you are addicted to debt, cancel your credit cards and your over-draft protection, and whenever you are tempted to assume more debt, discipline yourself by enforcing a mandatory 24-hour waiting period on yourself before you buy anything. If impulse buying is a problem, go shopping for necessities with only enough cash to pay for the items on your list. Leave your checkbook and credit cards at home.

            These principles of freeing oneself from the cruel taskmaster of debt are true in any economic scenario and in any income bracket. Work to be debt-free, to pay yourself rather than creditors, and to earn rather than pay interest. It makes dollars and sense. (If you want more specific help with debt, type “become debt free” into your web browser.)

Apply Agency-Preserving Principles

Take wisdom and counsel from those who have walked the road of life before you.	“The safe way to double your money is to fold it over once and put it in your pocket.” Frank Hubbard “There is a very easy way to return from a casino with a small fortune:  go there with a large one.” Jack Yelton “The real measure of your wealth is how much you'd be worth if you lost all your money.”  “Money is neither my god nor my devil. It is a form of energy that tends to make us more of who we already are, whether it's greedy or loving.”  Dan Millman “People are living longer than ever before, a phenomenon undoubtedly made necessary by the 30-year mortgage.”  Doug Larson
Never believe you will be the exception to the laws of nature.	Remember that interest on debt never sleeps. You pay it 24 hours a day, 365 days a year. Debt is to be avoided like the plague. Before taking out a loan try making do with what you have and going without. Make a budget and stick to it. Work to increase your income and reduce your expenses. If you absolutely must borrow, make sure your ability to repay doesn't exceed 36-42% of your income. This number is called your debt ratio. You can find debt ratio calculators online.
Know you will harvest what you sow.	The younger you are when you start saving, the more you’ll have when you are old. If you acquire wise financial habits in your younger years, you will reap dividends when you are older. Prideful persons, if they have ten dollars will act like they have a thousand. Humble persons who have a thousand, will act like they have ten. “He is rich or poor according to what he is, not according to what he has.” Henry Ward Beecher.
Learn the lessons of history so you won’t repeat the mistakes.	Mike Tyson -- The famous boxer reportedly earned $300 million in his career, but it wasn’t enough to support a lavish lifestyle. He filed for bankruptcy in 2003, owing $27 million. MC Hammer – Despite a former $33 million income, he filed for bankruptcy in 1996. Scottie Pippen – The former Chicago Bulls star lost $120 million in career earnings due to poor financial planning and bad business ideas. Evander Holyfield - Four-time boxing champ reportedly made over $250 million in cash during his boxing career, but despite this he is now flat broke. Some others who made big money and spent it all and then some include: John Daly, Nicolas Cage, Bernie Kosar, Gary Coleman, Kim Basinger, Don Johnson, Michael Vick, Andy Gibb, Isaac Hayes, Lenny Dykstra, Latrell Sprewell, Mick Fleetwood, and Marvin Gaye. (http://www.freemoneyfinance.com/2010/05/the-ten-worst-money-mistakes-anyone-can-make.html.)
Find the power in resisting impulse, persisting, and delaying gratification.	Resisting impulse is nowhere more obvious than in impulse spending. There are two types of over-spending that can ruin your finances. Those people who over-spend on little things, don’t keep track to see how fast little things add up and, quite honestly, fill their homes with junk. They waste thousands yearly. Those people who over-spend on such things as homes, cars, vacations, and recreational toys, etc., the big things, put their financial lives in continual jeopardy. Both types of impulse spending are childlike responses to life: “I want it now.” These tendencies can be overcome by developing the discipline to wait for the second marshmallow.
Develop personal integrity and make moral decisions.	It's good to have money and things money can buy, but it's good, too, to check up once in a while and make sure that you haven't lost the things that money can't buy.
Know that others see things you don’t and welcome their perspectives.	Just as the West and Chaney families sought out an honest and wise financial advice to help them make the best use of their winnings, so should all the millions of other people who don’t win lotteries be wise in studying out how to manage whatever money they do have. If you are enticed by a get-rich-quick opportunity that seems to be too good to be true, one-hundred percent chance it’s fraudulent. Never fall prey to telephone scams. Check with your local better business bureau and on the Internet. Be thoughtful and deliberate in all money matters.
Work, Work, Work.	“Every day I get up and look through the Forbes list of the richest people in America.  If I'm not there, I go to work.”  Robert Orben
Make goals, write them down, use failure avoidance, prioritize, avoid procrastination.	Do make a financial plan. Do live on a budget. Do pay bills on time. Do put some amount in savings every pay day. Don’t pay just the minimum on your high credit card balance. You’ll may never pay it off. Don’t ever borrow from family or friends. Don’t ever lend to family or friends if you are expecting to be paid back. Don’t take out a debt-consolidation loan. It actually increases your debt. Don’t take out bankruptcy unless you’re tried absolutely every other possibility. “People with low self-esteem engage in more impulse spending and buying things they don't need…. Remind yourself daily that money or a lack of it doesn't determine who you are. Your worth as a person has nothing to do with how much money you have. Once you truly believe this, and money is no longer connected to your sense of self-worth, you open up the psychological barriers that were keeping you from wisely handling the money you do have and limiting your ability to make more” (http://financialplan.about.com/cs/creditdebt/a/UrgeToSplurge.htm).
Value yourself. Know you can make a difference.	Give a percentage of your income to God. He’s asks for a tenth. (See Hebrews 7:2.) Give a percentage of your income to the poor. (See Matthew 19:21.)
Develop a happy inner core.	The best way for a person to have happy thoughts is to count his blessings and not his cash. The poor is hated even of his own neighbour: but the rich hath many friends. He that despiseth his neighbour sinneth: but he that hath mercy on the poor, happy is he. (See Proverbs 14:20-21.)
Develop the backbone to say “NO!”	·      Just say no to lotteries; just say no to debt; just say no to bankruptcy; just say no to purchasing a household items or living expenses with debt. Save for big ticket items, especially cars. Then you won’t get car sickness, that feeling you get monthly when the payment is due.